SIFMA recommended clarifications of proposed guidance in relation to (i) the posting of bids-wanted on trading platforms and (ii) "pennying." (See generally MSRB Requests Comment on Agency Execution Procedures.)
In comments submitted to the MSRB, SIFMA called for clearer definitions and guidance. SIFMA said that "pennying" should be defined as the "persistent or pattern of internalization of orders for which the dealer internalized at prices that are only nominally better than the cover bids." SIFMA said "nominal" should be defined and determined by a "facts and circumstances analysis." SIFMA also stressed the importance of distinguishing between "pennying," "internalizing," and "last-look."
In addition, SIFMA clarified that there are instances when the use of a bid-wanted process for price discovery should not be considered an "unfair practice" under MSRB Rule G-17. SIFMA said that it is unclear whether dealers would bid more frequently if internalization did not take place and called for studies to be conducted demonstrating that bidding impedes liquidity.
Additional comments on the MSRB draft interpretive guidance can be found here.
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